Yesterday in Supreme Court - CX Valuation - Discount - Classification - Heel Guard - medicament or skin care product
WITH a Special Tax Bench in the Supreme Court, many old issues are getting settled and unsettled.
Central Excise - Valuation - Cash Discount has to be taken into account in arriving at "price" even under Section 4 as amended in 2000: In Central Excise, valuation is a problem as old as Central Excise itself. And the Government ensures that the same issues are agitated before the Supreme Court again and again. In the case decided yesterday, the Supreme Court considered the valuation provisions as it existed prior to 1973, after 1973 and before 2000 and after 2000.
The main issue was deduction on account of trade discounts. The Supreme Court observed, "It can be seen that the common thread running through Section 4, whether it is prior to 1973, after the amendment in 1973, or after the amendment of 2000, is that excisable goods have to have a determination of "price" only "at the time of removal". This basic feature of Section 4 has never changed even after two amendments. The "place of removal" has been amended from time to time so that it could be expanded from a factory or any other premises of manufacture or production, to warehouses or depots wherein the excisable goods have been permitted to be deposited either with payment of duty, or from which such excisable goods are to be sold after clearance from a factory."
When sold does not mean the time: The Supreme Court observed that the expression "actually paid or payable for the goods, when sold" only means that whatever is agreed to as the price for the goods forms the basis of value, whether such price has been paid, has been paid in part, or has not been paid at all. The basis of "transaction value" is therefore the agreed contractual price. Further, the expression "when sold" is not meant to indicate the time at which such goods are sold, but is meant to indicate that goods are the subject matter of an agreement of sale.
Vaseline Intensive Care Heel Guard is medicament: The issue involved in the appeal is as to whether Vaseline Intensive Care Heel Guard ('VHG') is to be treated as merely a skin care preparation or it is a medicament having curing properties.
The product in question, Vaseline Intensive Care Heel Guard, is marketed as a solution for cracked heels and it is claimed that this solution is specially developed by the scientists at Vaseline Research. The composition of this product includes salicylic acid I.P. 1.5% w/w. lactic acid 8.0% w/w. Triclosan 0.1% w/w. Cream base - q.s. Salicylic acid is described as keratolytic substance having bacteriostalic and fungicidal properties used in the treatment of fungus infection of the skin. The Tribunal, while deciding that the aforesaid product is a medicament, pointed out that the product was formulated and essentially used for treatment of 'cracked heels', protection from further cracks in the human heels due to extreme climatic conditions and low humidity, constant exposure of feet to water and due to absence of shoe or other protection while walking. It also found that this product was manufactured under a drug licence as drug authorities had treated the same as a medicament. The Tribunal also found that the usage of this product was related to the effect of therapeutic or mitigating substance of prophylactic substances added. Thus, the effect of mitigation of an external condition is primary effect and the effect of smoothing the skin was secondary in nature and, therefore, it was to be treated as a medicament and classified under Chapter 30.
The Supreme Court agreed with the Tribunal.